Investors are always looking for growth in small-cap stocks like Beasley Broadcast Group Inc (NASDAQ:BBGI), with a market cap of US$183m. However, an important fact which most ignore is: how financially healthy is the business? Assessing first and foremost the financial health is vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, since I only look at basic financial figures, I suggest you dig deeper yourself into BBGI here.
How much cash does BBGI generate through its operations?
Over the past year, BBGI has ramped up its debt from US$207m to US$244m , which is made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at US$10m for investing into the business. Additionally, BBGI has generated cash from operations of US$26m in the last twelve months, resulting in an operating cash to total debt ratio of 11%, indicating that BBGI’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BBGI’s case, it is able to generate 0.11x cash from its debt capital.
Can BBGI pay its short-term liabilities?
With current liabilities at US$35m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.07x. For Media companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does BBGI face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 89%, BBGI can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In BBGI’s case, the ratio of 2.19x suggests that interest is not strongly covered, which means that lenders may be more reluctant to lend out more funding as BBGI’s low interest coverage already puts the company at higher risk of default.
Next Steps:
BBGI’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BBGI’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Beasley Broadcast Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BBGI’s future growth? Take a look at our free research report of analyst consensus for BBGI’s outlook.
- Valuation: What is BBGI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BBGI is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.